Western Digital Corporation · NASDAQ:WDC

Western Digital — Q2 2022 Earnings Presentation

24 slides from Western Digital's earnings presentation, Jan 27, 2022

1. Slide 1: Fiscal Second Quarter 2022 Financial Results

   Fiscal Second Quarter 2022 Financial Results Western Digital January 27, 2022 (Updated HDD revenue chart on slide 5 on January 31, 2022, all other data unchanged)

2. Slide 2: Forward Looking Statements

   Forward Looking Statements SAFE HARBOR This presentation contains forward-looking statements within the meaning of federal securities laws, including statements regarding expectations for the company’s business outlook for the fiscal third quarter of 2022; and capital allocation priorities. These fo

3. Slide 3: Executive Summary

   Executive Summary Financial Results • Revenue of $4.8B • Operating cash flow of $666M • Non-GAAP diluted net earnings per share of $2.30 • Free cash flow of $407M • Non-GAAP gross margin of 33.6% • Cash and cash equivalents of $2.5B Corporate • Received an investment grade corporate rating from Fitc

4. Slide 4: Revenue Trends by End Market

   Revenue Trends by End Market Cloud Client Consumer In billions In billions In billions $ 2.4 $ 2.4 $ 2.4 $ 2.0 $ 2.0 $ 2.0 $ 1.6 $ 1.6 $ 1.6 $ 1.2 $ 1.2 $ 1.2 $ 0.8 $ 0.8 $ 0.8 $ 0.4 $ 0.4 $ 0.4 $- $- $- Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 Revenu

5. Slide 5: Flash and Hard Drive Metrics

   Flash and Hard Drive Metrics Flash Revenue and Gross Margin Hard Drive Revenue and Gross Margin In billions In billions $ 2.8 40% $ 2.8 40% $ 2.4 35% $ 2.4 35% 30% 30% $ 2.0 $ 2.0 25% 25% $ 1.6 $ 1.6 20% 20% $ 1.2 $ 1.2 15% 15% $ 0.8 $ 0.8 10% 10% $ 0.4 $ 0.4 5% 5% $- 0% $- 0% Q2F21 Q3F21 Q4F21 Q1F2

6. Slide 6: Non-GAAP Financial Results

   Non-GAAP Financial Results Q2F21 Q1F22 Q2F22 QoQ YoY Revenue ($M) $ 3,943 $ 5,051 $ 4,833 ($ 218) $ 890 Gross Margin % 26.4% 33.9% 33.6% (0.3) ppt 7.2 ppt Operating Expenses ($M) $ 696 $ 761 $ 741 ($ 20) $ 45 Operating Income ($M) $ 343 $ 952 $ 882 ($ 70) $ 539 Interest and Other Expense, net $ 68 $

7. Slide 7: Cash Flow Walk

   Cash Flow Walk In millions $666 ($259) $3,370 ($1,223) $57 $2,531 (1) (2) Q1F22 Operating Cash Cash CapEx Debt Other Q2F22 Cash & Cash Flow Repayment Cash & Cash Equivalents (Net) Equivalents ▪ Net debt repayment of $1.22 billion and completed a debt refinancing transaction ▪ Strong liquidity positi

8. Slide 8: Fiscal Third Quarter Guidance

   Fiscal Third Quarter Guidance (1) GAAP(2) NON-GAAP(2) Revenue ($B) $ 4.45 - $ 4.65 $ 4.45 - $ 4.65 Gross Margin % 30.0% - 32.0% 30.0% - 32.0% Operating Expenses ($M) $ 860 - $ 880 $ 750 - $ 770 Interest and Other Expense, net ($M) ~ $ 80 ~ $ 70 Tax Rate % N/A ~11%(3) EPS – Diluted N/A $ 1.50 - $ 1.8

9. Slide 9: Joint Venture Operational Framework

   Joint Venture Operational Framework For more information on Flash Ventures, please visit investor.wdc.com for a recently published Flash Ventures presentation. Flash Ventures 49.9% Owned by Western Digital 50.1% Owned by Kioxia Co-develops flash (including process technology and Owns and leases equi

10. Slide 10: Capital Expenditure Framework

    Capital Expenditure Framework 1 2 3 Cash Capital HDD CapEx Flash Flash Ventures (1) Non-Fab CapEx Parent Loans(2) Expenditures 3 4 5 Flash Ventures Capital Flash Ventures Flash Ventures Flash Ventures Net Operating Expenditures Parent Loans(2) Lease Financing(2) Cash Flow(2)(3) 1 2 3 4 5 Gross Capit

11. Slide 11: Gross Capital Expenditure Trends

    Gross Capital Expenditure Trends In billions $ 3.5 $ 3.0 $ 2.5 $ 1.6 $ 1.5 $ 2.0 $ 1.0 $ 1.9 $ 1.5 $ 1.1 $ 1.0 $ 2.0 $ 1.6 $ 1.5 $ 1.4 $ 0.5 $ 0.8 $ 0.8 $ 0.0 -$ 0.3 -$ 0.5 (1) FY17 FY18 FY19 FY20 FY21 FY22F (2) (3) Cash CapEx WD portion of: Flash Ventures Cash Flow + Flash Ventures Lease Financing

12. Slide 12: Capital Allocation Priorities

    Capital Allocation Priorities Highest Priority Strategically reinvest to continue driving Reinvestment in the Company technological innovation Reduce Debt Target 1.0x – 3.5x Debt-to-EBITDA Shareholder Return Dividend Share Shareholder return opportunities will be reevaluated Program Repurchases 12 ©

13. Slide 13: Appendix

    Appendix 13 © 2022 Western Digital Corporation or its affiliates. All rights reserved.

14. Slide 14: Quarterly Fact Sheet

    Quarterly Fact Sheet In millions, except Average Selling Price (ASP), Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 percentages, and working capital related metrics Revenue by End Market(1) Client $ 1,869 $ 1,767 $ 1,895 $ 1,853 $ 1,854 Cloud 1,014 1,423 1,995 2,225 1,920 Consumer 1,060 947 1,030 973 1,059 Total Re

15. Slide 15: Quarterly Fact Sheet Footnotes

    Quarterly Fact Sheet FOOTNOTES FORMULAS Days Sales Outstanding (DSO) = Accounts Receivable / (Revenue / # of days in quarter) Days Inventory Outstanding (DIO) = Inventories / (Cost of Revenue / # of days in quarter) Days Payables Outstanding (DPO) = Accounts Payable (including Accounts Payable to Re

16. Slide 16: Debt Capital Structure Post Refinancing

    Debt Capital Structure Post Refinancing Current Cap Table Debt Maturity Profile (in billions) As of Jan 7, $ 4.0 All-in Over 85% of debt to mature in Debt Rate(1) Maturity 2022 Rate(2) 2026 or later (in millions) $ 3.5 Convertible Debt Due 2024(3) 1.50% 1.50% 2/1/2024 $ 1,100 $ 3.0 Sr. Unsecured Not

17. Slide 17: Debt Tranches and Interest Rates

    Debt Tranches and Interest Rates (Based on Debt Capital Structure as of December 31, 2021) Principal Balance Debt Base Rate Maturity Outstanding end of Applicable Rates(1) Q2F22 (in millions) Revolver drawn(2)(3)(4) L+137.5 February 27, 2023 $ 0 1.452% Term Loan A-1(3)(4) L+137.5 February 27, 2023 3

18. Slide 18: Credit Agreement Defined Leverage Ratio

    Credit Agreement Defined Leverage Ratio In millions; unaudited; trailing 12 months Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 Net Income $ 167 $ 347 $ 821 $ 1,491 $ 1,993 Income tax expense 146 169 106 143 202 Interest and other expense, net 329 290 293 294 302 Depreciation and amortization 1,471 1,338 1,212 1,0

19. Slide 19: Net Income to Adjusted EBITDA Reconciliation

    Net Income to Adjusted EBITDA Reconciliation In millions; unaudited Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 Net Income $ 62 $ 197 $ 622 $ 610 $ 564 Income Tax Expense 23 52 (26) 94 82 Interest And Other Expense, Net 73 68 79 74 81 Depreciation And Amortization 336 251 251 250 242 EBITDA(1) $ 494 $ 568 $ 926 $

20. Slide 20: GAAP to Non-GAAP Reconciliation

    GAAP to Non-GAAP Reconciliation In millions; unaudited Q2F21 Q1F22 Q2F22 GAAP Gross Profit $ 960 $ 1,665 $ 1,583 Amortization of acquired intangible assets 109 39 26 Stock-based compensation expense 15 9 14 Charges related to a power outage incident and related recovery (45) - - Non-GAAP Gross Profi

21. Slide 21: GAAP to Non-GAAP Reconciliation

    GAAP to Non-GAAP Reconciliation In millions, except per share amounts; unaudited Q2F21 Q1F22 Q2F22 GAAP Net Income $ 62 $ 610 $ 564 Amortization of acquired intangible assets 148 78 64 Stock-based compensation expense 80 76 87 Employee termination, asset impairment and other charges 2 18 2 Charges r

22. Slide 22: Supplemental Operating Segment Results

    Supplemental Operating Segment Results In millions, except percentages; unaudited Q2F21 Q3F21 Q4F21 Q1F22 Q2F22 Net Revenue HDD $ 1,909 $ 1,962 $ 2,501 $ 2,561 $ 2,213 Flash 2,034 2,175 2,419 2,490 2,620 Total Net Revenue $ 3,943 $ 4,137 $ 4,920 $ 5,051 $ 4,883 Gross Profit By Segment HDD $ 488 $ 49

23. Slide 23: GAAP to Non-GAAP Reconciliation Footnotes

    GAAP to Non-GAAP Reconciliation FOOTNOTES This presentation contains the following financial measures that are not in accordance with U.S. generally accepted accounting principles (“GAAP”): non-GAAP gross profit; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating income; non-GAAP

24. Slide 24: Western Digital

    Western Digital.

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